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Catch Your Next Wave: An Anti-Retirement Handbook, Copyright ©2015 Gary Bedford. All rights reserved. This manuscript may not be disseminated, distributed, or quoted without written permission of the author and copyright holder.

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Catch Your Next Wave…An Anti-Retirement Handbook A street savvy approach to navigating wealth and happiness…

Gary Bedford, ChFC® & RICP®, CIMA®

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Note: This book is intended to provide general insights and information on the subjects presented. In accordance with Internal Revenue Service (IRS) Circular 230, the author’s opinions and views expressed here are his alone, and do not reflect the opinions or investment outlook of the author’s professional affiliates, Cambridge Investment Research Inc., a Registered Broker/Dealer and Member FINRA/SIPC, and Cambridge Investment Research Advisors Inc., an SEC Registered Investment Advisor. The information in this book is not intended to represent tax or legal advice. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor the opinions expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Gary Bedford.


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Contents A Passion Re-check… ......................................................................................................................................................................................................... 5 1 “What to do?” .................................................................................................................................................................................................................. 7

1st Interval: …walking out to meet the waves .......................................................................................................................................................... 7 2nd Interval: …swimming out… ............................................................................................................................................................................... 8 3rd Interval: …floating… ............................................................................................................................................................................................ 8 4th Interval: …rules & playing seriously… .............................................................................................................................................................. 8 5th Interval…what do we have to work with? ........................................................................................................................................................ 9 6th Interval: …repetitions…returns ............................................................................................................................................................................ 9

A 1st Chapter check: ................................................................................................................................................................................................ 10 2 “What’s going on?” ....................................................................................................................................................................................................... 11

Sex, Tech, Capital, Globalism & Ecology: Street Econ 101 .................................................................................................................................. 12 Measurement ........................................................................................................................................................................................................... 12 Human Behavior ..................................................................................................................................................................................................... 13 Asymmetry .............................................................................................................................................................................................................. 14 Unpredictability ...................................................................................................................................................................................................... 14

“Sex” …The Human Wave ....................................................................................................................................................................................... 14 “Tech” … “homo faber” – “human the maker” ..................................................................................................................................................... 16 “Capital” …value flows............................................................................................................................................................................................. 18 “Globalization” …the global village….................................................................................................................................................................... 19 “Ecologies”…your oceanic liquidity risk… ............................................................................................................................................................ 21 Summary ..................................................................................................................................................................................................................... 22

3 “How to do it?” ......................................................................................................................................................................................................... 23 Setting, re-setting…a “critical path” ........................................................................................................................................................................ 23 Healthcare.................................................................................................................................................................................................................... 24

Medicare A, B, D ..................................................................................................................................................................................................... 24 Medicare “Advantage” C ...................................................................................................................................................................................... 25 Long Term Care (“LTC”) ....................................................................................................................................................................................... 26


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Estate Planning for Your Life ................................................................................................................................................................................... 27 Powers of Attorney ................................................................................................................................................................................................. 27 Wills and Trusts ...................................................................................................................................................................................................... 28

A Financial Life-Plan ................................................................................................................................................................................................. 29 Assessing your resources…................................................................................................................................................................................... 31 Base-Wave Tools ..................................................................................................................................................................................................... 35 Body-Wave Tools .................................................................................................................................................................................................... 38 Crest-Wave Tools .................................................................................................................................................................................................... 41

Get your team moving together… ........................................................................................................................................................................... 42 Summary ..................................................................................................................................................................................................................... 44

Bibliography: .................................................................................................................................................................................................................. 45


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A Passion Re-check…

“Perhaps the only way to retire and be happy is to…not retire.” (Edward, in Hector and the Search for Happiness)

Living a fulfilling life usually means we have found a way, a path…we have created value for ourselves and our loved ones. We are rich in human capital. Passion and purpose drive this path – it’s the excitement of catching a good wave and surfing it, or a powder day on a favorite downhill run, a Mozart concerto, the field ready for planting, the harvest…it’s the wind in our sails…we are flowing with the forces of the universe.

One’s “passion path” may be tied to our life’s work, to family or community, to building a business or a career, or combinations of these all of which flow together. And this wealth of human value, quite miraculously, creates financial wealth.

If you picked up this handbook, you are likely one of 80 million or so “boomers” - 10,000 of us are reaching 65 every day now. We are children of the great generation who fought WWII, who secured our freedoms and way of life, who put up with our protests and rebellions, but more than anything, to our amazing creativities – our IBM parents may have invented computers but we made them rock’n’roll in the PC, and the now I-Phone, the Internet. And if you picked up this handbook you may be thinking about “retirement,” that next new opening on your path.

And as the great American folk yogi, Yogi Berra, says – “…if you come to a fork in the road…take it!” Catch the wave, push off down the mountain! But are you ready? Then how? First, let’s protest the very word “retirement” - to retire literally means “to withdraw, fall back, retreat or recede.” Yet the typical boomer’s endgame isn’t a gold watch and a party, it’s the next adventure, the next project, discovery, the next wave…! No, boomers, and even our parents, want to stay in the game, to keep playing, because more than ever we have health (longer, better lifestyles) and wealth (money and ways to deploy it more freely). So when Hector, himself searching for “happiness”, meets Edward, the global banker, on a flight to Beijing, he discovers Edward’s existential secret: “Perhaps the only way to retire and be happy is to…not retire.” So an “anti”-retirement meditation reflects on our path up to this fork in the road, but as Yogi says, you then must take it (!), move forward – the universal energy that propels your life is always moving, always on a wave.


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And here’s the thing – we started in the 60s with Dylan’s “…the times they are a changing” and now the lyrics read, “…the times they are traveling at warp speed, Spock…!” Or as that amazing space traveler Buzz Light Year, or his cosmologist pal, Stephen Hawking, say: “Off to infinity, and beyond!” To wit, before us we see a dizzying set of realities – the global economy, volatile capital markets, political turmoil and social change – and we ask, “How can I live my next-wave years in this new world?” We need a practical plan that can survive and adapt to a constantly changing world.

How to move on, to re-launch? Actually, it’s really just another phase-shift, it’s what we have always done. Sociologists estimate boomers have likely changed work-paths as often as 5-7 times in their careers – not just from one company to the next, but to entirely new jobs or professions. But remember, we are the ones who largely created these new technologies and industries – we helped put this changing world in play. Our parents fought the big fight, but then challenged their kids to go “beyond,” to “reach for the moon,” in John F. Kennedy’s words.

I believe everyone has a dream, a calling, something they want and need to do with their life. But to paraphrase JFK, “…dreams don’t just happen…they have to be made to happen.” Living your dream, your passion, your faith, should be your fundamental next-wave goal. This handbook might help you work through the emotional and practical processes to make your dream real. Next-wave success is built on three fundamental truths:

First, your passion or faith, discovering and unleashing who you want to be and what you want to do in your next-wave life. Second, you need a sound plan that serves your goals and dreams. Finally, we believe you cannot execute your plan and live your dream at the same time. In today’s complex world, we believe the

success of your plan demands professional care for your physical health, as well as professional guidance and management for your wealth – your legal estate, your legacy to your family or community, and your financial assets and investments.

Our brief journey will ask three questions, a kind of “1-2-3” in the “art of life-surfing”:

1 “What’s to do?” (What do I really want to do now, what’s my passion, what’s next?)

2 “What’s this new “global” world? (What’s going on?)

3 “Then, how to get up on the board, catch the wave, and ride?” (How to do it?)

While we should relax and play with the possible answers, it’s still a very serious play. We are traveling in a vulnerable spaceship on a risky journey. Did you realize that the Apollo missions were never on an exact course to the moon? Instead, they were constantly checking and self-correcting their flight to stay within a “critical path.” And that’s what a next-wave plan should be, a testing and correcting system that keeps its travelers on their critical path.

Gary Bedford, Boulder County, Colorado


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1 “What to do?” “Things do not happen. Things are made to happen.” John F. Kennedy

Your next-wave life is an exciting, transforming, yet potentially highly stressful life-event. It can be as stressful as losing a job or

personal injury or illness.1 Working with clients over the past 30 years, we’ve learned that it’s less about going through an adjustment period, say a year or so, than it is simply remembering that adjusting to change is what human life is always about. That’s actually an easier mind-set – it’s just the next-wave of the process. Recall your first encounter with some big phenomenon of nature, a great river or mountain, or perhaps it’s the ocean and its incessant waves at your feet – you had to re-check your instincts, your street savvy, and then adjust.

1st Interval: …walking out to meet the waves Since you’ve made it this far, you must know how to catch your wave, your unique energy, your momentum, in a word your e-

motion. A life lived with passion is a wonder of nature. Shifts, changes of trajectory, catching new waves, are all invitations to journey onward – it’s an ongoing event, especially in the last third of life’s journey. Living is a recurring innovation, and a constant challenge.

There may be intervals, however, moments of pause, seams in the layers of your history. Waves have carried you this far – childhood, growing up, education (both academic and “the street”), career(s), children and family…but now, what, where? Pausing presents a break to catch your breath, to re-discover these energies, your élan vital, your “vital force.”

So a 1st interval may be about taking stock of things…of what, or who, or how you have come this far. Recall the waves you caught along the way, perhaps your family’s circle around the dinner table, the council of parents, big and minor rebellions, teen shenanigans, college freedoms and exploration, but then the leap into “reality” along your life’s vocation. Looking back, what were the insights, the loves, the victories and defeats, that revealed your core values and the passion that would drive your life?

A pause like this can be stressful, even frightening – maybe you let go of a business or career that had been your ship, or perhaps you re-embrace it and stay onboard but with new energies, renewed goals. Like Edward the global banker, some decide the way to retire happily is to – not retire. But on the other hand, your reality check may remind you that it’s still too early, that you can’t yet afford to stop working at 60 or 65.

Either way, perhaps moving into our 60’s presents an invitation to remember and recharge the life values and passions that have carried us this far.


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2nd Interval: …swimming out… Moving into the ocean we have turned away from the shore, out to an open horizon. The horizon is a real destination yet it

appears infinite, unlimited. It’s created by a bend in the trajectory of the earth’s surface – a “mind-bender” as we would say in the 60’s. We meet the waves that bounce us around, disturb our balance, and take us out of a comfort zone. We begin to pay attention

with different instincts. The seafloor’s slope slips away and we have to shift our grip from earth to this new ocean world, to swim or float rather than stand.

This may be a good space to contemplate both the horizon’s deeper energies, but also to re-imagine the shore from a new angle. Or maybe not to think at all, to just float, to experience the buoyancy that in a certain respect defies gravity. Life emerged from the ocean; we’re back.

3rd Interval: …floating… Floating lets the waves pass under. We’ve just been transformed from bipedal creatures to near weightless, water creatures.

There is no firm ground, we have only the distant shore but now also the waves as references. This may be a “time out”, or a kind of “time out of time,” to relax and re-connect with a primordial home, the ocean. But it’s also

a risky time, where we have to keep our heads above water, breath differently, where our instincts take command. Floating forces a new set of rules on us.

Floating is also a human universal. We might not afford the $1M beach house over there on the shore, but floating out here we’re all equal. The ocean exposes our vulnerable humanities while it re-reveals a marvelous universe.

4th Interval: …rules & playing seriously… As boomers, we love to play, and we’ve played most of lives. Instead of suffering through the Great Depression and then going off to fight WWII like our parents, boomers have usually been blessed with amazing floating intervals called “college educations.” Some of us worked our way through college. Others worked summers and then slipped back into this weird suspension of reality to just study “stuff” – Shakespeare, Einstein, IT, molecular or oceanic biology, business and capital, etc. We emerged as the most educated generation in history.

We learned to study both inside and outside the box, to imagine (John Lennon), to challenge society (Martin Luther King), to re-write a “hard” world into a “soft” text (Bill Gates), to discover the universe’s impossibilities (Stephen Hawking’s black holes), to “reach for the moon and beyond” (Neil Armstrong). Rules, we said, are not limits as much as possibilities to be challenged. At times we forgot that rules also point to the great risks of the survival. We fired on one another at Kent State, and found that space shuttles explode without intact O-rings.


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Playing is therefore a very serious game. Neo-Platonist philosophers called it a serio ludere2, or a “serious play.” But it’s also a “series of plays,” it’s a move from one play to the next, and next. A next-wave life is both a new beginning and our next “play.”

This kind of play is intensely practical. Playing the economic and capital market game may get more intense, riskier, once you’ve reached “financial critical mass,” or a net worth that more or less makes you economically independent. Yours and your family’s security is at stake. The rules can jump up and bite. Sharks may be swimming in your waters.

Navigating confusing health-care choices, created largely by society’s awkwardness in adjusting to the exciting but expensive technologies which we invented, is another practical game. We have to take it all seriously.

5th Interval…what do we have to work with? So what valuable resources do you bring to the play?

Your practical value includes both real as well as human capital. Capital, simply stated, refers to the various forms of value you have created in life. Real capital, and all its variations, includes the energies you have stored in savings, stocks and bonds, IRAs and pensions or 401ks, Social Security, real estate, or perhaps a family business. Human capital represents your experience, your unique abilities, your expertise, your hard-won intelligence, your wisdom. Real capital is hard currency; while social capital is “soft” currency it may be even more valuable.

Preparing for the next wave is about the real capital that will sustain you and the human capital that will inspire you on your journey. We invest hard capital to drive our social capital dreams and goals. They’re both waves of energy which sustain the next wave.

6th Interval: …repetitions…returns Investment returns on your plan are more like re-turnings…successful investors constantly review, re-hash, re-evaluate their plays. Post-career planning is always a re-planning, a rather methodical and constant re-calculation, or course correction, along a critical path. Optimally, your plan will let you live on your hard capital income while you explore and grow your next waves(s). But once you have a real-world strategy in place, you must have methods to check your progress and make course corrections. Financial environments change, often unexpectedly, and so your strategy must also adjust. Think back over the past 20-30 years and recall the random events and crises – in the 70’s the end of the gold standard, the 1972-73 stock market crisis, then hyper-inflation, the oil crisis; in the 80’s it was the advent of information technology, the 1987 black “Monday” stock meltdown, the Cold War ends in ‘89 with the opening of Brandenburg Gate; the roaring 90’s gave us a revived global economy, amazing economic growth but then dot.com stock bubbles; the new millennium opens with 9/11, and more recently, the 2008 financial crisis.


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In the pages ahead, we will (2nd Chapter) explore a unique and dynamic way of understanding our economic world, and then (Third Chapter) we will survey tools and methods for navigating it, for riding its waves. Finally, we will describe how you can begin to set your course, catch your next wave…

A 1st Chapter check: • Was there an idea, or a person, a teacher, or a dream that set you on your current path?

o Note: ______________________________________________________________________________________________________ • Do you have a creative side – music, writing, study, adventure – that you’ve not had time to pursue?

o Note: ______________________________________________________________________________________________________ • Is there a social or humanitarian cause you want to push forward?

o Note: ______________________________________________________________________________________________________ • Does your “bucket list” give you any ideas about what you may want to do – travel, serve, create?

o Note: ______________________________________________________________________________________________________ • Is there a passionate idea for a new invention, or a business you’ve always thought about but not had time to pursue?

o Note: ______________________________________________________________________________________________________ • Can you think of a friend or buddy, a pastor, a mentor you can talk with and bounce ideas off of?

o Note: ______________________________________________________________________________________________________ • Is there a different place or community you want to live or have a 2nd home?

o Note: ______________________________________________________________________________________________________ • Do you have children which need help or guidance?

o Note: ______________________________________________________________________________________________________


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2 “What’s going on?” “The internet will change everything. But instead of happening over a hundred years,

like the Industrial Revolution, it will happen over seven years.” John Chambers, President, Cisco Systems.

Ask yourself, “Do you trust your street savvy more than your school savvy?” Sure we have to use both, but in the end it’s our instincts and intuition we rely on – trial, error, then re-trial, re-error, and gradually we start to get it. Like learning to swim – there’s nothing like a couple of gulps of water to make you learn to breathe carefully. Very young children instinctively adjust to the water – maybe we need to swim like the child to move into this ocean we call the future. So what are these awesome waves of energy – what’s going on?


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Sex, Tech, Capital, Globalism & Ecology: Street Econ 101 Powerful waves – human, technological, economic, ecological – constantly wash over this amazing globalizing world. And you

are getting ready to plunge your assets into it – are you sure about how to do that? Because, like the ocean itself, “what’s going on” is more promising yet dangerous, more complex yet in-your-face risky, and more unpredictable than our smartest scientists or even our street instincts can grasp. This means that your strategy has to be more about preparation than prediction, really about preparing for the unpredictable.

When we stand on an ocean beach, waves wash over our feet, having originated deep out at sea. We are mesmerized by their incommensurable energies. Waves return us to a core natural logic, they connect us to the miraculous world soul. Yet waves can be shockingly real. “Rogue” waves can unpredictably reach heights of 80-100 feet from swells of only 4-10 feet. We know that earthquake-triggered tsunamis devastate shorelines, yet scientists now know that mega-tsunamis many times more powerful can be triggered by landslides and can create waves hundreds of feet high and moving at hundreds of miles per hour.

Though waves appear as ‘normal’ surface phenomena, the energies which move them defy easy measure. Indeed, it is waves themselves which can deceive us, mesmerize us into their seemingly steady, predictable rhythm. If you’re street savvy you might love the street, or the ocean, but you don’t necessarily trust it, you’re always questioning what you see and what you think you know about what you see. So a street savvy plan will be suspicious of terms like the “economy” or the “markets” or “labor statistics.” Likewise, modern economics or finance can mislead us into thinking that markets can be rationally managed.

Economics can get removed from the street, like an Alan Greenspan speech. Over his 20+ years speaking to Congress, in the end, after all the econ-babble, Mr. Greenspan often admitted he couldn’t predict and didn’t know – he reverted to his street skepticism. In the midst of the amazing 1990’s global bull market he confessed, “I have learned more about how this new international financial system works in the last twelve months than in the previous twenty years.”3 He admitted he had to re-think everything he thought he knew. And George Soros, the international currency hedge-fund whiz, confessed about the same time that “...the character of the financial markets has changed beyond all recognition during the forty-five years that I have been involved in them.”4

So for a moment, let’s dig into what economics tells us about why it can’t really know what’s going on and why it can’t predict the future, both the very near future and surely not the next 20-30 years of your next-wave life. Let’s briefly consider these economic subjects and how they will affect a next-wave personal economy: measurement, human behavior, asymmetry, and unpredictability.

Measurement - First, the waves – human, tech, capital, global, ecological – are hard to measure. Inputs include “hard” data

points, such as the volume of sales in a given market sector like automobiles, or “normal” mortality rates insurance companies use to estimate life expectancy, and these are more or less quantitatively measurable – so-called ‘everyday waves’. But do all these ‘hard’ data


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points help us predict future economic events? What drives carmakers nuts is trying to predict what model will sell best, what’s the price of gas going to be that will influence car-buyers, what will governments try to do next to regulate fuel efficiency?

In The Black Swan, Nassim Nicholas Taleb plays a game of pool, but rather than shooting balls into pockets he helps us try to estimate the future trajectory of the billiard ball. The ball’s first impact is an elementary calculation (e.g., resistance of the table surface, weight of the ball at impact). The second impact requires similar but more precise measure. However, by the 9th impact our calculation must take into account the gravitational effect of our own (and our pool partner’s) weight and mass on the ball as we stand by the table, and by the 56th impact we must know the gravitational pull of every particle in the universe. Taleb points out that Henri Poincaré was one of the first mathematicians to advance this problem which he termed “nonintegrability” – prediction of future events requires data from the future. So to really manage a telegraph company in the 19th century – an invention that changed the planet – you would have needed to know about the prospect of artificial intelligence leading to “email,” and not just its mechanics but the social-economic impacts of information technology (“IT”)5 on human communication – like “texting” instead of talking. The billiard ball is a quantitative problem of measure which does not begin to account for the qualitative problem of human behavior that in turn changes the whole ball-game of measure and predictability.

Human Behavior -”Soft” data – the qualitative impact which information has on human attitudes and action (e.g., consumer

choice, political preference) – simply are not quantitatively measurable yet they can be far more influential to economic outcomes. “Quirky” events change and even warp group behavior. Jane Goodall, one of the first modern anthropologists to study primates in their natural state (though, as even she noted, her very presence changed their “‘naturalness”), once observed a younger, wimpy, adolescent male chimpanzee in the troop. But then one day in the forest he happened upon, of all things, an errant tin garbage can lid – and when he picked it up and started first to tap it and then to beat on it, he suddenly began to rise to the top of the pecking order, and the scene ends with him on top of a pile of bananas handing out rations to the other chimps – we can name this economic principle “the chimp in the forest with the garbage can lid...!” Economists now call this “behavioral finance.”

These random, unexpected behavioral events happen more than we realize. Ask most engineers if Microsoft is the “best” programming platform – it’s simply not, but it was the first – in the forest with the … – and because it quickly grabbed market share it’s now a dominant software operating system. Behavioral finance is a new discipline which is attempting to study these non-quantifiable phenomena. It tries to figure into the market equation how people often make decisions based on “rules of thumb,” how they tend to employ outdated value systems in assessing financial choices, how, in short, they often use non-rational decision-making in their economic behaviors.

These behavioral effects pose a challenge to your next-wave success. For example: How are you measuring your wealth, estimating your future expenses, accounting for future inflation, what rates of return on your investments are you assuming, what processes are you deploying to invest and track your investments into financial markets, how long will you live…??? All of these


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predictions carry an elusive “behavioral” component - they are decision-processes which will constantly affect your next-wave planning.

Asymmetry - Wave energies are often asymmetrical. For example, baby boomers, about 75-80 million strong and representing about a quarter of the U.S. population, have continuously overwhelmed economist’s models and predictions. The global economy is replete with asymmetries – for example, the U.S., with roughly 4% of world population, nonetheless drives about a 25%h of the global gross domestic product.6 Technology shifts can suddenly and asymmetrically change history – the industrial revolution, in just a few generations, transformed civilization. We are now living through the IT and Internet revolution which will continue to change and affect your next wave lifestyle. Think of the difference between your lifestyle and your grand- or great-grandparents’, who more than not likely worked a farm, did not have capital investments, and who raised most of their own food.

Unpredictability – Consequently, next wave plans will be more unpredictable than our parents. Statistics attempt to quantify

economic activity and predict outcomes, yet like the waves on the beach they can also lull us into a mesmerized expectation. But statistics admits its own limitations and failures if we pay closer attention. For example, Benoit Mandelbrot, one of the most important mathematicians of the 20th century (he innovated fractal geometry) points out that economic models based on statistical data should predict that price fluctuations between two currencies should fall into “normal” and “probable” ranges. So the fluctuation between the Japanese yen and the U.S. dollar should range within three “standard deviations” of “normal.” In fact, a 2002 Citigroup study discovered that daily price changes could be as high as 10 deviations – the statistical model predicted this should happen only once every 15 billion years, or less than once since the Big Bang!7

Measure, behavior, and unexpected asymmetries incessantly flow and over-flow each other in feedback loops, and their effects appear to be gaining momentum in the global economy. They challenge next wave planning. The task here is similar to the difference between a hiking map and the territory it covers – we use the map but we rely on our senses and instincts to constantly re-assess our location. Statistics and prediction help us get the picture yet we rely on experience and instinct to counter-check the numbers – and we need to have plans in place to prepare for the unpredictable. Our next wave world flows on powerful yet subtle energies – what we call sex, tech, capital, nature…

“Sex” …The Human Wave We were the children of the sexual revolution triggered by, yes, a new technology, birth control. It changed our world, our values, how we related to our parents and grandparents, and it let us postpone and control when and if we had families. The ‘60’s passions unleashed rock and roll, anti-war protests, and civil rights movements. Boomer demographics are now re-shaping markets again, as 10,000 of us are moving every day into next wave lives. The new big boomer revolution is being driven by 80 million of us starting to seek income from our assets, retirement plans, and social security.


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Globally, boomer demographics will be dwarfed by the flows of developing peoples gaining economic strength and scale – since the 2008 financial crisis roughly 60% of global economic growth, or $1 trillion, occurred in China. Developing nations now account for 40% of world manufacturing production, a doubling since 1990. The new tech global economy is accelerating human wave prosperity – the early industrial revolution in Britain initially doubled economic output per person every 150 years - the U.S. picked up the pace and did it in about 50. China and India have doubled their output in roughly 15 years.8 It’s helpful to read this human wave as a story rather than a metric or statistic. For example, in the Western “mytho-religious” perspective, after the world is “created” in Genesis, the story moves not so subtly to Adam and Eve in the Garden. And we quickly learn that the critical moment will flow from human desire – enticed by weakness to a serpentine curiosity – and what results is of course the commitment of humanity to a life of labor and economic production. The garden now includes 7+ billion souls and counting, a myriad of cultures, languages, economies, and the acceleration of their global connectedness.

As boomers invaded the U.S. garden markets were transformed. Proctor and Gamble prospered providing disposable diapers to reproducing boomers but then, not fully realizing they were marketing to a demographic wave, it almost went out of business until they figured out that the babies had grown out of diapers and needed baby-carriages, baby foods, etc.

The boomer story continues to wash over markets today. Did you notice, as did demographer Harry Dent, that first-time boomer home-buyers in the early 1970s helped quickly double home values? They also triggered unprecedented increases in mortgage rates, which had ranged from 4-5% for decades, to highs of 17%+ by 1981?9 The ‘70s hyper-inflation cycle in the U.S. was also triggered by the end of the monetary gold standard (“capital wave”) as well as government debt from the Viet Nam war (“global political wave”), and what ensued from this finance tsunami were two corresponding economic after-shocks: First, the well-studied inflationary shock (capital under-supply, very high interest rates, a weak economy, frequent recessions) from the 1970’s to the mid-1980’s, but then a second and less-studied disinflationary wave from the 1980’s to the mid-2000’s (capital surpluses, falling interest rates, economic expansion) as the political economy adjusted. The second wave created a “tailwind” economy which was aided by the end of the Cold War (“global wave”) that in turn relaxed markets (“capital wave”) and coincided with radically new IT technology and the internet (“tech wave”). And it was all these educated boomers – perhaps the most innovative generation in history (think Ben Carson, Bill Gates, Steven Jobs, Steven Spielberg) – who drove technology. The human, capital, and tech waves work like feedback loops which inter- and over-flow and so shape one another, and consequently make prediction difficult and even counter-productive.

The human wave is really a set of different cultural and economic feedback loops. Culture is simply how peoples configure themselves by their customs, languages, belief systems (religious as well as secular), by their expression in the arts, and it’s the set of rules people use to govern themselves.

Futurist Alvin Toffler (Future Shock, The Third Wave) has configured human history into three “waves” of cultural-economic organization. First Wave cultures were hunter-gatherer societies which gradually developed into agrarian societies; agriculture, the most important early technical innovation then facilitated the advance of government and formal economies. Second Wave cultures,


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triggered by the Enlightenment’s scientific revolution’s re-thought the human role in nature and gave rise to technological development, and also re-worked previous government and economic platforms (democracy and free markets); it deployed new economic methods (mass production-distribution-consumption), as well as “mass”-media and education; it culminates with the Industrial Revolution10. The Third Wave, the Information Age, is displacing industrial society with blazing and asymmetric speed – it took the industrial revolution about 100 years to take hold, whereas the internet driven information age has taken less than ten.11

In this emerging Third Wave, “what’s going on” is changing rapidly. Rather than merely industrial raw materials – one of the primary reasons World Wars I and II were fought – “information” is now the paramount “commodity,” the new core economic “value,” the new “capital.” Steam and then electricity were the core powers of industrialism but it was what they could do – power industry, light homes, provide consumer products – that changed the world. Likewise, data is merely the raw-stuff. The real challenge is how data is applied and deployed – into robotics, for example. So knowledge is the new commodity yet it’s how the human mind applies and adjusts to it that matters: “…information can now travel 15,000 miles in an instant. But the most important part of information’s journey is the last few inches – the space between a person’s eyes or ears…”12 In the early 1900’s the “cognitive” professions (e.g., physicians, scientists, lawyers, teachers, engineers) represented 4% of the work-force – today they are over 30%.13 Nobel economist Robert William Fogel states that “…the main form of capital today is not buildings, machines, or electric grids but labor skills, what economists call human capital or knowledge capital. Both for individual and for businesses, it is the size and quantity of these immaterial assets that determine success in competitive markets and conditions of life for ordinary people.”14

Fogel calls the feedback loop between the tech and human waves “technophysio evolution” and he observes that it “has led to an increase in the world’s population during the last century alone that is far greater than any that occurred during the whole previous history of humankind.” The human wave lags behind technical progress and “…it is this lag that has provoked the crises that periodically usher in profound reconsiderations of ethical values, that produce…ethical and social reform…and give rise to political movements that champion the new agendas.”15

Next-wave thinking is a uniquely human task because it brings anticipation to bear on preparation. It’s just getting more difficult to predict the future. However, it is possible to prepare for the likelihood of constant change and to develop a strategy which constantly re-checks and adjusts itself. Next wave strategies may fail unless they adjust to change – success and prosperity are about configuring your life using practical decision-making. Most of all it’s about constantly checking, balancing, and adjusting your critical path.

“Tech” … “homo faber” – “human the maker” “Personal economic independence” is a new 20th-21st century phenomenon and it has spurred entirely new financial

technologies. As recently as our grandparent’s generation the idea that the common folk would retire on financial assets alone was unheard of. Social security did not exist until the 1930s, and few – mostly railroad workers – had pensions, and those only originate


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around the turn of the century. While the first mutual funds originate in the 1920’s, most Americans did not invest systematically in the stock market until the 1970’s or 1980’s, in particular with the introduction of 401(k) group retirement savings plans in 1986. New financial technologies – robo-advisors, ETFs (exchange traded funds), fixed indexed annuities, income benefit riders, robo-advisors, tactical and strategic investing – will challenge your next-wave preparation.

Technology’s wave-effect can be both sudden and shocking, like the invention of gunpowder or the atom bomb. Yet tech development can also be subtle, like the rising cost of social safety nets (Social Security, Medicare) due to new but more expensive medical innovations which then increase life expectancies. Technology is “hard” (I-Phones, I-Pads) yet it is more transformative as it changes “soft” cultural techniques such as labor innovations. We celebrate the fact that “…just two hundred years ago, over half of all Americans worked in agriculture…today, the figure is less than two percent.”16 “Good” news. Yet this means that virtually all U.S. agricultural labor has been lost or destroyed to soft and hard innovations – our recent ancestors simply wouldn’t recognize our working lifestyles today.

The tech wave has a dizzying affect upon the human wave. In our new global tech workplace, the human labor wave is churning under a dynamic job-creation and job-displacement cycle: “…In 2005…the United States gained 31 million new jobs, which sounds fantastic, but also lost 29 million existing jobs. The gain of 2 million jobs netted out as a plus, but an astonishing 60 million Americans had some kind of job-status change in that year.”17 And this is not uniquely American - from “1994 to 2004 the Chinese lost 24 million manufacturing jobs, 10 times more than the U.S.”18

Technology will continue to re-figure our 20-40 year next-wave life. But it’s hard to measure. Economists talk about “total factor productivity” as the combined effect of labor, capital, and technology. Labor and capital can be measured, but tech’s affect is difficult, even impossible to measure. For example, from 1909 to 1949 U.S. productivity doubled and about 12 percent was due to labor and capital, which means the 88% remainder must be due to technology. But as Robert Gilpin observes “some residual…the residual is really a measure of our ignorance.”19 Human technology is a force of nature “inside” the wave. We can feel it and ride it but really can’t measure it. Try to remember, or better yet, explain to your grandchildren, what life was like before touch tone, cell phones, Google, before the Internet, even color television…and now imagine how you would describe your 21st century lifestyle to your grandparents or great grandparents.

Tech will buffet and bounce our next wave life. Tech affects the human wave profoundly – our grandkids would rather text than telephone us. And it’s happening on a global scale - the recent “Arab Spring” (but also China’s social transformations) was soft- wired by the Internet, cell phones, and social media. As Mohamed Haykal, an Egyptian historian and confidante of Abdel Nasser observed during the recent Egyptian Spring, “The effect of mobiles, computers, satellites – there is a generation coming that is outside the traditional controls. Normally, generations re-create themselves. But something else is happening.”20

A next-wave “economics” from this larger view is not a metric science as much as the imagination of how these waves are flowing through our lives. The famous 20th century economist, Joseph Schumpeter, spoke metaphorically rather than quantitatively of


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the “the perennial gale of creative destruction” to describe this radically creative yet high-risk economic system.21 We can see how tech is accelerating this creative competition in stock markets – today a company listed on Standard & Poor’s 500 largest U.S. companies can expect to live there only 15-20 years, down from 60+ years only 5 decades ago.22 Consequently, a next-waver’s stock portfolio is at greater risk than ever before. And the new tech waves – IT, genome research, 3D printing, social media - are only gathering strength in the 21st century.

Your next-wave years will flow through this innovation and, more significantly, its incessant re-innovation. A next-waver needs to harness it and use it. For example, contemporary financial technologies will allow you to access your plan in real time to regularly check and re-check your progress – just as you would adjust and re-adjust a flight-plan flying along its critical path.

“Capital” …value flows Understanding the capital wave presents a more daunting task – it’s another feed-back loop in the human-tech equation. In

recent decades, energized by new information technology and the re-emergence of a more global economy, the way we manage our capital assets has changed dramatically. Moving into your next-wave years, it will be important to understand how this new economy will affect your life and income security.

Beginning in mid-1700s, the industrial revolution transformed western civilization by dramatically re-organizing the production process. Adam Smith’s 1776 Wealth of Nations described how an English straight-pin factory with 10 workers performing specialized tasks (cutting the pin shaft to length, sharpening the tip, installing the head, packaging the final product) could produce up to 48,000 pins per day, when a single worker, performing all the tasks individually, could make only a handful in a day.23 With this new “division of labor” the modern market economy began to take shape as consumer goods became more plentiful and affordable.

Likewise, the modern corporation changed how companies could organize by creating smaller investment units (“a stock”) and then limiting the liability of each investor to their stock holding. Now 100 or 1000 individuals could pool their investments into innovative “companies.” The company could experiment with new inventions or production techniques. By “…1901 the world’s first billion-dollar corporation – United States Steel – appeared on the scene, a concentration of assets unimaginable in any earlier period….by 1919 there were half a dozen such behemoths.”24

Today we live in a hybrid economy – part industrial with larger companies producing on global scales (Toyota, Sony, Proctor & Gamble, Amazon, Microsoft) and then another part that’s post-industrial, with smaller, often family owned, companies providing “services” (your doctor, attorney, CPA, or plumber). Starting in the 80’s large companies began to reduce their labor force using global labor and automation and they also began to change their benefit packages – specifically, they replaced their expensive pension plans with 401k’s. At the same time, small service firms were adding employees but with limited resources and operating capital. So another earth-shaking capital transformation subtly rocked our career-waves, the replacement of our parents’ “defined benefit” (“DB”) pension


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plan with the “401k” “defined contribution” (“DC”) plan.1 401k-DC plans required no annual funding (technically they are “profit sharing” plans in which employer funding is optional based on company profits) – this allowed the large companies to be more competitive and it allowed smaller companies to offer retirement plans on a thin budget. But DC plans also put the critical next-wave planning and preparation decisions – How much to save?, Where to invest?, When can I retire? – squarely on the shoulders of the employee. This was a sea-change and shocking transformation – forcing millions of Americans to become economists, investors, and financial planners and often without much if any preparation. How many of us studied economics or investments or retirement planning in high school or college? How many of us kept up with the changes in capital markets and investments during the rocking 1990’s?

Your next-wave years will likely rely on various sources: Social Security and possibly an old defined benefit pension, your 401k or IRA accounts, other savings and investments, and possibly inheritances. Defined benefit pension income and Social Security benefits provide monthly income but with no control over the underlying investment. Savings assets from 401k and IRAs are under your control and are ”liquid,” and must be positioned into investments such as CDs and annuities, mutual funds, stocks and bonds, or possibly real estate instruments. In Chapter Three we will explore three investment tiers – Tier One provides a more secure “footing” (Social Security, pensions, annuities which protect principal and may provide for necessary expenses such as housing, food, healthcare), Tier Two provides a “diversified” tier to provide additional core income and but also growth of income to offset inflation, and possibly a 3rd “crest” Tier for high-risk investments, or for gifting of surplus assets to family or charity.

Next-wave capital resources are immersed in this new “global” economy wave. Actually, a globalized economy, where nations trade openly with one another, has been around for most of the modern period – the Cold-War interrupted it from 1945-1989. What’s different now is that nation-states have been steadily re-shaped by globalism. Instead of governments controlling their separate economies, the inter-connected global economy now tends to shape the way nations manage their public policy.

“Globalization” …the global village… Whatever is “going on” – it’s now global. So what is “globalism?” First of all, it’s not new – the global economy began to develop in the 16th century when Europeans

(Spain and Portugal) began wave-riding the world’s oceans using advanced navigation to move goods around the world. The Dutch followed by combining banking with shipping, and by the 18th century France joined in. In the 19th century Great Britain combined

1 Defined benefit plans provide “guaranteed” lifetime retirement income, and so require significant annual reserve funding; consequently, DB plans are highly regulated by the Department of Labor. Defined Contribution (“DC”) 401k plans provide tax-advantaged savings funded by the employee’s own payroll deferrals and supplemented by optional employer “matches” or profit sharing deposits.


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shipping and mass-production to become the first globally dominant political economy. So globalism is really a re-emerging phenomenon which was interrupted by the Cold War’s partitioning of the world’s markets.25

Paul Tiffany, a global economist from the Haas Business School (University of California, Berkeley) has taught around the globe, including the China-Europe International Business School in Shanghai, China. He offers this description of the new global marketplace: “…globalization is the process whereby the nation-states of the world have become more closely integrated through trade, technology, and capital flows across borders. It is the triumph of the market over the state. Individual nations and their politicians no longer have been able to tell their citizens what they can buy or where they can buy it or how they can buy it. Globalization has turned the entire world into a bazaar…”26 Thomas Friedman adds: “We didn’t realize that the victory of the Cold War was a victory for market forces above politics. The big decisions today are whether you have a democracy or not and whether you have an open economy or not. Those are the big choices.”27 In China today 90 million individual stock investors now outnumber the 88 million members of the Communist Party.28

As one of world’s oldest civilizations China has transformed itself from a closed system to a more open global economy. Led by Deng Xiaoping, who walked beside Mao in the “Great March,” China in the late 1970’s began to re-emerge because it opened itself to a more globalized, market oriented economy: Said Deng, “Not a single country in the world, no matter what its political system, has ever modernized with a closed-door policy.”29 What’s crazy about the new global mix is that a dominant 20th century communist, Deng, became one of the its most influential “capitalists” – actually, he is best understood as one of history’s most effective pragmatists – he is famous for saying “It doesn’t matter if the cat is white or the cat is black, as long as the cat catches the mouse!”

Globalization will affect and confound our next-wave outcomes as we ride its momentums. Globalization is emergent – we are only in the early stages of its latest growth spurt. It’s emergent but it’s also an emergency – a next-wave prep-plan simply has to get its brain around the fact that it’s the new ocean we are riding. The global economy defies measurement – while the “formal” world global economy equals @$87 trillion gross domestic product, this leaves out the “informal” economy (the unmeasured flow of just the legal “cash” market) which adds perhaps another $10 trillion.30 Proctor and Gamble is riding this wave – much of its growth comes from its ability to sell its household products into the millions of one-person, cash kiosks in the developing world.

The first-wave of global re-emergence started with the developed world deploying modern market techniques between its players and then into the developing world. The next phase of global emergence is already happening to the developed world – that is, the developing world is both producing and trading within itself and then to developed countries.31 Its asymmetries create quickly moving flows and overflows – we notice the movement of migrant workers from developing to developed markets yet the movement is even greater between developing countries. Observe the sudden immersion of developing cultures into technologies and mass markets – they didn’t hard-wire their communication systems but rather went directly to cellular.32 Emerging country mining companies now control nearly half of the global basic materials markets.33


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Globalization may seem like the driver of social change but it’s really about the market becoming more integrated to the flows of the human, tech, and capital waves. The question is: How will it affect your next-wave life? It will likely be a positive force by making nation-states more economically inter-dependent – so Germany and France or China and the U.S. are less likely to wage war on one another. Yet it will confuse our expectations of global stability when we observe the transfer of jobs from developed economies to less expensive development world labor markets, or when we see floods of workers crossing our borders and overwhelming our social systems. And as the world becomes a village, everyone is affected by globalization – recall that China lost 25 million manufacturing jobs from 1994-200434 - ten times more than the U.S.

Globalization is an example of how history moves ahead of human experience (especially as public policy tries to adjust, witness U.S. immigration struggles to reform) because it confounds and complicates the existing political, economic, and indeed the moral and ethical ways we organize our lives. Change is relentless, incessant, like the waves on the shore. And yet the economist Robert Gilpin observes “The idea that globalization is responsible for most of the world’s economic, political, and other problems is either patently false or greatly exaggerated. In fact, other factors such as technological developments and imprudent national policies are much more important than globalization as causes of many, if not most, of the problems for which globalization is held responsible.”35

Why is it important for you to get a grip on the globalization of sex, tech, and capital for your next-wave life? Simply because it’s the social and economic life-world in which your life and your assets must survive and thrive. It’s your social-economic “ecology”. And speaking of ecology…

“Ecologies”…your oceanic liquidity risk… We can think about investments for a second: the “financial” assets that will drive next-wave life-styles are actually liquid forms

of “money,” or more accurately, financial values, perhaps stocks, bonds, real estate, or money markets you own directly or in “pools” of investments such as mutual funds or exchange traded funds (ETFs). Even “hard” or tangible assets like real estate or gold are valued in financial terms, and they require some form of liquidation to provide income – gold has to be sold and someone has to give you rent if you own a real estate portfolio. The market is the flow of liquid values between buyers and sellers.

So can you say “Fukushima 2011…Katrina 2005…or even Tokyo earthquake 1923…?” – all of which had sudden, unexpected, and massive effects on the very economy your next-wave life will be relying upon.

Two things are radically new about ecological events. First, they’ve always been there but now science can detect and sometimes predict them – plate tectonics and volcanoes…solar storms…hurricanes. Second, the global village has made itself more vulnerable to these risks - in the last 75 years or so, more people are living in urban centers and along the globe’s highest risk coast lines, and more critically our advanced technologies are more vulnerable than ever to environmental risk. The Fukushima disaster disrupted energy flows but spurred German leaders to close its nuclear energy production. Internet communications which run our


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lives and move markets are exposed to solar radiation storms. These ecological events will have unpredictable effects on our personal economic security.

Next-wave living should expect bumps and disruptions and prepare as much as possible for the effects of the unpredictable. Engineers make things, but often discover their innovations must be adapted, particularly to “human factors.” Bob Bea, co-founder of the Center for Catastrophic Risk Management in Berkeley, CA. observes: “We engineers…understand the logic of systems and machines. What we don’t understand is all of you illogical humans. We aren’t trained to account for things like hubris, greed, sloth, office politics, and the rest of it. …Dealing with the human factor is almost always more complicated than the technology.”36

Summary “What’s going on?” is exciting. It will give us a great ride. Yet it’s more complex and unpredictable – and risky – than we might expect. It’s simply the case that next-wave planning is more about continuing to grow with the flow, preparing, re-checking, and then enjoying the ride! “What’s going on” is an unfolding equation. Study and observe it today, but then get up in the morning and re-think it. The momentums are flowing, changing. Our next-wave lives must embrace the promise and the vulnerability of this still emerging world, understand that’s it’s still relatively new and that it’s changing rapidly. Next-wave living and thriving must be shaped to navigate these exciting and risky momentums.

Which leads to the next step: “How am I to do it?”


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3 “How to do it?” “The will to win is not nearly so important as the will to prepare to win.” Vince Lombardi

Setting, re-setting…a “critical path” Waves roll ashore in “sets” as their energies are pushed up by the underlying shoreline beneath. Catching waves is about watching and reading and then responding, “re-setting” yourself to the wave’s energy.

Surfers say their art begins with reading the natural under-flow – the “what’s going on” - from the wave’s subtle surfaces. Wave-catching requires trial and error patience and humility – not only being unafraid to fail but actually exploiting failure to learn and then re-bound on the next wave.

Once you catch the wave you are riding its magnificent and mysterious flow. Now the challenge is to stay up, to continuously re-correct your flight, to ride the wave’s energy as it flows up the shore. Each wave brings a completely new challenge, a unique and singular ride, and each rider’s DNA reveals a different response.

In an initial wave-check you must ask yourself – “Am I ready – do I have the resources, to retire or re-set?” In The Demographic Cliff, Harry Dent, a noted boomer demographer and futurist, observes that the average person starts working around age 21-25, works to about age 63, and can expect to live to age 85-90 – about 2 years working for every 1 year of retirement.2 Unless you have saved prolifically you may not have the resources to fully retire, especially if your primary income source is Social Security. Before you pull the trigger a careful assessment, most likely with a financial professional, is vital for your long-term success. You may discover that you can fully retire, or alternatively that you should continue to work even part-time to supplement income and defer full retirement.

A planning and preparation system needs to check and then continuously re-check itself, to capture and then remain on a “critical path.” A surfer or a spaceship are never on a perfect course. They are moving within a pathway, riding the wave’s flow or the ship’s thrust, within a parameter and toward a target on the horizon. Surfing and flying are more about correcting than being correct.

Your next wave is here, it’s re-setting. Your life’s intangible works – family, children, contributions to your community and profession – flow in your wave.

As well, the wave includes your tangible creations including perhaps a business, pensions and social security, healthcare plans, 401ks, IRAs, savings and investments.

Planning may be more about practicing. Yogis say that “yoga is practice” which prepares the yogi for health, happiness, peace of mind. We go back to practice, to re-prepare. Get into the game, and sooner: the practices outlined here work if you are 20 or 2 2 Harry Dent, The Demographic Cliff, page 314.


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years, or 2 months from a next-wave life. Find a rhythm, work into it at your pace with your momentum, but be sure to notice the urgency: living within a critical path is an ongoing practice, it’s an emergent play because it’s always unfolding underneath and underfoot.

Looking back on your life’s path, you will likely identify mentors or teachers, or advisors and friends, yogis, who may have coached and guided you as you made your way. Few of us can simply jump on the surfboard and ride the waves on our own. As modern life grows more complex you will be increasingly challenged in the “How to do it…?” phase. The ongoing counsel of trusted advisors who can continue to coach you will be invaluable and necessary in order for you and your loved ones to thrive and succeed. This team includes both close personal advisors (spouse, children, friends, business associates, church or community buddies) as well as formal advisors (doctors, attorneys, CPA, financial advisor) to whom you may turn for counsel at critical moments.

There are three core “sets” in this real-world practice: healthcare, estate planning, and financial management. Your time horizon is likely 20-30+ years. The next-wave world is complex, getting more complicated, and it will continue to rock-n’-roll your preparations. Your ongoing practice involves each of the sets because the next-wave may be longer than you think and more complex than you can know.

Healthcare Healthcare is one of the “What’s going on?” practices that will challenge your next-wave peace-of-mind because of its cost, complexity and unpredictability. It’s just a fact-of-life that modern societies will continue to grapple with the economic and ethical dilemmas of delivering medical care. Recent studies report that a 65-year-old couple with just average prescription expenses may need $150,000-200,000 to have just a 50% probability of covering post-career health expenses, not including long term care expenses.37

In the big picture there are two healthcare sources to consider: government plans (Medicare) and private plans (e.g., Medigap and Medicare Advantage) which supplement government plans. In addition, a next-waver must consider long term care insurance which provides extended custodial care.

Medicare A, B, D Medicare, in all its “parts,” provides government health insurance starting at age 65. It is not designed to cover all health care costs. In recent years, with baby-boomers reaching age 65, the fiscal stability of Medicare is in question – it’s likely that coverages, costs, and funding will evolve in coming years. Because people are living longer due to modern medicine and pharma, it’s likely that the enrollment age will increase for our children and grand-children, perhaps even to age 70 or so.

Medicare Part A coverage generally includes hospital care and then post-hospitalization skilled nursing care (this does not include “custodial” or long-term care), and end-of-life hospice care including home hospice. Part A enrollment usually occurs at age 65 when one enrolls in Social Security.


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Medicare Part B is the core “major medical” government plan and covers services such as doctor’s care, diagnostic testing, medical equipment, but also ambulance, surgical care, cardiac and pulmonary rehabilitation, emergency care, occupational and physical therapy, kidney dialysis, some mental healthcare, prosthetics, and may also include transplants and immunology care. Part B enrollment is voluntary and may be deferred or “opted out” until after age 65, if, for example, a person continues to work or is covered under a spousal major medical plan.

Because A and B do not provide complete coverage, private “Medigap” and “Advantage” insurance plans may provide supplemental coverage but with confusing complexity – there are currently 10 different Medigap plan types based on elected coverages.

Medicare D was introduced in 2006 and provides a separate set of prescription drug coverage. D plans are optional and because many Medicare participants have significant prescription needs opting out may present large out-of-pocket costs. D has separate premiums, deductibles, and copayment arrangements in addition to other Medicare plans above.

Medicare “Advantage” C While Medicare A, B, D, and Medigap are “fee-for-service” plans, with deductibles and co-insurance costs (usually 20%),

Medicare Advantage or “C” plans are designed as “managed care,” similar to conventional health insurance. Advantage plans come in two basic genres, Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO). HMO’s restrict services to the provider organization (with exceptions for emergency care) and require that care be administered through a primary physician. PPO’s provide preferred or “in-network” services as well higher-cost “out-of-network” services. HMO and PPO hybrid plans include provider-sponsored organizations (care provider and insurer are the same) and HMO point-of-service plans.

Advantage plans require a stronger commitment and so they have certain shortcomings: they are different around the country and harder to change when you re-locate or have multiple residences, providers are paid an ongoing wellness fee and may limit services, they usually require a primary MD’s referral for specialized care, there can be significant cost differences between in-network and out-of-network care, and because Advantage plans must provide comprehensive services, deductible and co-insurance costs are usually higher.

Perhaps the key deciding factor is this: Medicare A, B, and Medigap plans are “fee-for-service,” so physicians and hospitals are paid only when a service or procedure is ordered, while Medicare Advantage plans are “managed and preventive” to the participant’s unique wellness needs and may better avoid unnecessary procedures and services. Advantage plans allow participants to forgo Medigap premiums, and unlike Medicare or Medigap they usually offer vision, dental, and hearing care though with additional premiums. Advantage plans tend to simplify a next-waver’s lifestyle because care is usually delivered by the same familiar core team (MD, physician assistant or PA, nursing staff, administrative staff). Paperwork and bureaucracy are reduced so you have more time to focus on your health and well-being.


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Long Term Care (“LTC”) Folks are living longer, often beyond the point where they can care for themselves – life expectancy was 47 years in 1900, today a 65-year-old has a life expectancy of age 83+. It is estimated that up to 60% of Americans will need long term care in their lifetimes. Costs are more than you might imagine – up to $450/day or $13,500/month for home care, the preferred arrangement over custodial care.

There are four financing alternatives for LTC: Self-funded planning works for higher net worth individuals (>$2-3 million in liquid net worth) who are not concerned with

passing wealth on to or heirs or charity. For those wanting to preserve their legacy wealth, LTC insurance may be a viable asset protection alternative.

Government coverage requires qualifying for Medicaid (recall that Medicare does not provide LTC). Medicaid coverage is the least desirable LTC option because eligibility requires “spending down” almost all assets (savings, investments). And because Medicaid generally reimburses only 80% of costs, care is usually inadequate and often neglectful.

Charitable care is uncommon and usually occurs when someone has a special relationship with faith-oriented providers. LTC insurance transfers risk to private insurers and may be the most practical and reliable alternative. It allows a next-waver

to create an LTC safety net for the control of care. Many LTC plans offer a private “concierge” consultant to ensure personal privacy and dignity during the care process. LTC may be especially important for singles desiring independence from family, or with no family close by to offer care.

Conventional indemnity LTC coverage may be available from large-employer group plans, but costs and the ability to customize

benefits may be just as optimal from a privately purchased plan. LTC insurance provides a daily benefit triggered after an elimination period (usually 90 days); it will usually include a cost of living (COLA) rider to offset inflation and provides either in-home or certified custodial care. Benefits can be adjusted for one’s income – for example, if you have $5,000/month of reliable income (e.g., pension, Social Security, IRAs income guarantees) a supplemental LTC would fill in the potential need. LTC triggers do not require an MD’s certification but rather are determined by an inability to perform “activities of daily living” (“ADLs”) which include dressing, bathing, mobility inside the home, transferring in and out of bed, eating, and toileting. Other benefit triggers apply to cognitive or “instrumental” activities of daily living (“IADLs”) such as the inability to manage finances, shop, prepare meals, manage medications, use the telephone, or do housework. Care is provided in several settings – day care centers, nursing homes, assisted living facilities, but most often is centered on home care. Care may be provided by family members, medical professionals, and nursing professionals. The Pension Protection Act of 2006 (“PPA”) included a provision which went into effect January 1st, 2010 allowing for new, tax-advantaged long-term care alternatives. Special annuity and life insurance policies now provide “return of premium” features which


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return LTC insurance assets back to one’s estate if benefits are not used. For example, a non-IRA certificate of deposit or mutual fund can be converted to a special life insurance policy which would then provide multiples of the deposit for future tax-free LTC benefits. Unused benefits may then pass to heirs or the estate. Both indemnity and PPA-type arrangements require simplified medical underwriting so the optimal window to obtain LTC is in one’s 50’s or 60’s. Also, indemnity premiums are lower and PPA-type policies build more benefits in those age windows. Finally, many LTC plans offer “concierge” services where a professional counselor works with the insured or family to manage and expedite all aspects of ongoing care. This provides greater control, privacy and dignity to the care process and it relieves inexperienced or unprepared family members from the burden of decision-making. LTC is another complex yet essential fact-of-life for a next-wave lifestyle. It will become more vital for personal dignity and peace-of-mind as medicine extends life. It will become more desirable as we live longer and with a higher likelihood of a single lifestyle due to personal preference or the loss of a spouse. Its complexity requires the expertise and experience of core advisors to carefully integrate LTC planning into a big picture life-plan.

Estate Planning for Your Life A majority of Americans have avoided planning their estates – well over three quarters in fact. Yet a human soul’s legacy, its intangible and tangible creations and achievements, will continue. Everyone should try to ensure that final wishes are carried out and that the creative energies one harnessed in one’s lifetime continue to serve family, community, and memory. If you have prospered and built a valuable estate then you and your family deserve more than merely legal documents. Your next-wave life demands a serious and ongoing relationship with an estate or elder law attorney who can continually advise you and update your planning, but most importantly be there for your loved ones at critical moments. Your attorney should be part of your core advisor team.

Powers of Attorney First and foremost, your “estate” is about you while you are here alive on the planet, it’s about protecting you and your loved ones if due to accident or illness you can’t act or manage your affairs – pay the bills, manage bank and investment accounts, manage real estate, manage a business. Modern medicine keeps us going, often far longer than our parents’ or grandparents’ lifespans. We’ve been an incredibly active generation. Think of all the sports you may have pursued – tennis, golf, touch football, skiing, cycling, mountain climbing – or think of all the sports that were invented during our run so far: from hang-gliding to bungie jumping, sky-diving is now a routine recreation; we don’t just ski but now we ski off cliffs with parachutes. Even everyday activities like driving or commercial air travel bring risk to daily


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life. Yet trauma and disease are more survivable than anyone might have imagined just a generation ago. Modern medicine works miracles and saves lives. A next-wave lifestyle needs to be prepared for the possibility that illness or injury might trigger cognitive incapacity. And this preparation includes the possibility of later life dementias.

Consequently, we can set up legal safety nets called durable powers of attorney which allow someone we trust (an “agent” or “attorney in fact”) to manage our affairs during our incapacity – pay bills, manage bank, retirement or investment accounts, respond to our business or employers, etc. A second set includes healthcare powers of attorney to allow a trusted loved one such as a spouse, brother or sister, son or daughter, or a life-partner, to manage our healthcare according to our wishes and under the counsel of our physicians – for example, Do I want artificial life support, and if so how long and what measures do I grant? Finally, preparing a living will grants a family agent and doctor the ability to make end-of-life decisions in our behalf.

Keep in mind that both sets of documents – healthcare powers for ongoing care and a living will for end-of-life decisions – are essential for your legal toolkit. They prepare us for the life challenges that often are more difficult and complicated than dying. As more of us opt for single or non-traditional living arrangements, as we live longer and often beyond mental capacity, they become essential for a next-wave lifestyle.

Wills and Trusts Your legal advisor can lay out the considerations for electing either a will or trust. In many cases a will is sufficient. A simple will generally is appropriate when your family relationships and tangible assets are less complex, and your estate can then be conveyed to heirs immediately after you pass on. A complex will becomes necessary when family relationships (e.g., a second marriage with children from one or both spouses) are more complicated, when special needs planning is needed for heirs (e.g., a disabled child, an imprudent child or grandchild), or where assets are larger and more complex and require advanced wealth transfer planning. Wills are simpler instruments but they have two disadvantages. First, they take effect only at death so they are not helpful in the management of affairs during an incapacity. Second, changing a will often entails revoking and writing a new will which can be expensive if family relationships or wealth is expected to change. Revocable Living Trusts (“RLTs”) have become more popular because they address both limitations – they take effect during your lifetime and help manage affairs more seamlessly, and they can be amended less expensively to adjust for changing circumstances. The trust is simply a contract between you as the “settlor” on the one hand, and you as the beneficiary and “trustee” or manager on the other hand. Should you lose capacity, a successor trustee (usually a trusted family member, but if none can act you may also name a trust company) can assume management in your place – to pay bills, transact distributions from IRAs or retirement plans, and generally perform business functions for you. An RLT is generally a “flow through” tax entity which means income paid to a trust


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asset (e.g., a savings or investment account) passes through to you personally and therefore does not require a separate tax return. At your passing the trust becomes irrevocable and then does require a separate tax return.

When the trust is created you will “fund” or register your assets into it. Savings and investment accounts can be re-registered without tax to the trust, your IRA and life insurance beneficiaries can be adjusted (usually to a secondary position if you are married, with your spouse remaining primary), and your residence can be titled to your trust. Trust assets generally avoid probate at death, and if you own property in more than one state (e.g., an investment property), your estate may avoid costly multiple probate procedures. With assets titled in the trust, your successor trustee, armed with your durable powers of attorney, can manage your affairs for you during incapacity or illness. Finally, at your passing the trust becomes irrevocable and can continue to manage your wishes and directives, such as distributions to heirs or charities.

Because the trust is a personal contractual agreement during your lifetime, it can be customized to your unique circumstances and family relationships. For example, a special needs child or a financially imprudent heir can receive income but would not have actual control of assets so management can continue under the care of your trustee working with your financial advisor.

Finally, a revocable living trust is accompanied by a “pour over will” which fills two possible gaps: first, any assets that were not titled to the trust during your lifetime can be re-registered to the trust at death; and secondly, if for any reason you revoked your trust the will provides a backup plan.

As of 2019, if your net worth is less than the federal gift and transfer lifetime exclusion amount of @$11.4 million individually or @$22.8 million3 if married, these planning instruments (i.e., a will and/or living trust, healthcare and durable powers of attorney, living will) should be sufficient for your next-wave peace of mind. For larger estates, advanced planning measures may legally optimize your estate and minimize federal taxes which range from 35-40% for assets above the exclusion amounts.

Again, your core advisor team – attorney, CPA, financial advisor, physicians, and your personal team of family and friends – are vital human resources for your well-being. Your formal team connects you to your plans, coordinates your life’s next-wave healthcare, legal, tax, and financial platform – they continually advise and review your planning for you and your family, and then update it as next-wave environments change. Your informal team is there to understand your wishes, and to help manage your personal and family affairs if you can’t. Your next-wave life is a team effort – helping you manage your affairs so you can live more fully and freely.

A Financial Life-Plan You’ve been charting a financial path all along so a next-wave financial plan can be a natural move. Underfoot though, recall that the surf’s power – the What’s going on? - is real and unpredictable, like a big wave just breaking. A surfer doesn’t catch the wave as much

3 The American Taxpayer Relief Act of 2012 (ATRA) permanently established the Federal estate exclusion amount, which in 2019 is $11.4M per individual, adjusted annually for inflation.


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as she lets it catch her. Once up, the ride is about being prepared for the expected and the unexpected and staying on the board along a path. Every ride and rider reveals a unique trajectory – what’s the same is their ability to stay within a critical path. Setting a financial ride is much the same.


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The process involves three straight-forward steps that are really one because they repeat in unison: First, assessing your life’s resources. Next, charting a plan and positioning resources. Finally, executing the plan - monitoring performance and adjusting to changing economic conditions and circumstances.

Catching your next wave will likely mean changing gears with your assets and income. During your career-wave income comes

from outside sources – W-2 salary and wages and perhaps business income. In your next-wave life, except for Social Security and pension income, you will be transitioning to income created from accumulated savings and investments. So rather than steadily adding to assets in the form of investment growth and new savings, the flow reverses as you start to use asset income for lifestyle needs. When new money is flowing into your savings, stock market corrections and inflation are less noticeable. But when you change gears, the new flow of income from your assets will heighten your awareness of markets and inflation and cause you to re-consider your tolerance for investment risk and volatility.

The greatest next-wave challenge to your assets will be figuring out how much income you can prudently use for your lifestyle needs. An experienced financial advisor can work through a re-assessment to first re-configure (“allocate”) assets to increase principal risk protection, then re-balance methodically to maintain the desired asset exposure. Most importantly, your advisor can also be present to coach you through the inevitable turbulence of the markets and economy.

Assessing your resources… Three practices: inflows, outflows, and resources, and likely in that order.

What is your expected next-wave income? – Social Security, pensions, inheritance, asset income. What are your expenses? – mortgage, living expenses, insurance, healthcare, travel & entertainment, family and charitable gifting. What are your resources? – income sources, savings and investments, trust income.

Get into the habit of tracking and assessing even if a next-wave life is some time away. Practice tracking inflows/outflows from

both life-style and resource perspectives. Lifestyle: What’s your health now and expected to be – is a medical event like a knee or hip replacement in the picture? Are there

unusual family needs or events coming such as caring for parents? Are there cherished ‘bucket list’ aspirations like learning to paint,


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getting back to music, a second home, or traveling to Europe, the Holy Land, the Taj Mahal? Lifestyle initiatives benefit from the counsel of family, friends, and personal advisors such as physicians or personal trainers.

Resources: What are your assets and liabilities? What’s the budget now and how will it change in the next-wave? How are savings, investments, 401k & IRAs positioned – can they survive shocks from the “What’s going on?” factors? How will assets be affected by inflation and cost of living? Do you have a current Social Security statement and do you know when and how to start benefits? Are you tracking pension benefits? What’s the mortgage balance and when will it be paid? Is downsizing or re-location desirable or practical?

These practices and questions flow together and will drive your next-wave decision-making. Imagining a critical path works

with “What if?” questions also – How will inflation effect my path? What if interest rates soar again? How will investments be protected from a market crash? How much income can investments create, with what risk, and for how long? Will my reserves survive an emergency?

Your financial advisor can help assess your situation, inventory your investments and income sources, and chart a next-wave critical path. And crucially, they can be there when the seas get rough or your course needs correction. Recent research by Vanguard shows that over the past 10 years effective and ongoing financial planning and investment advice increased total returns on investments by as much as 3%. Vanguard attributed the success to three factors: first, careful asset allocation to match available resources and income needs; second, periodic asset re-balancing to the appropriate risk model; third and most significant, emotional guidance and support during periods of inevitable market volatility such as 1973-74, 1987, 2001-2002, and 2008.4

There is real yet often hidden complexity in a critical path plan. Your plan demands the ongoing counsel and experience of knowledgeable advisors – CPA, attorney, and financial advisor. Build relationships with them for two essential reasons. First, you can’t do it yourself – you need their expertise and most importantly their objective point of view. Second, live your next-wave life your way, as free as possible from the day-to-day stress of a complex world. As the great Olympic hockey coach Herb Brooks said so passionately to his undersized and overmatched U.S. team before their 1980 game against the Russians, “This is your time!”

4 Reference: Advisor’s Alpha, Donald G. Bennyhoff, CFA, Francis M. Kinniry Jr., CFA, The Vanguard Group, 2013.


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Positioning… You’ve already covered the healthcare and estate practices. Charting a plan and positioning resources is next.

Financial planning is not a one-time effort. You need to have your plan on an actively monitored grid so it can be reviewed and re-positioned as necessary. A comprehensive financial income and asset plan should include:

Income needs Cash flow analysis Inflation assumptions Investment performance and possible asset growth Estate and legacy planning such as family and community gifting

Wealth and assets are often modeled using a financial pyramid, but let’s also imagine the pyramid a moving wave – the wave is

alive and moving and so each level must be constantly monitored and adjusted. The pyramid is driven by your plan goals and objectives: Base assets provide essential living expenses; Body or Middle assets provide income and possible growth for future inflation, and possible lifestyle spending; Crest or Summit assets provide space for higher risk assets and possible legacy gifting. Each level allocates to investments for its specific objectives. Each level as well as the entire portfolio is then periodically re-adjusted to adhere to the plan and to the changing economic situation. Most importantly, Base investment returns are not expected to compete with Body and Crest assets, and the latter are not expected to be as secure as Base assets.


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Notice that none of the levels are risk-free because either principal risk or inflation risk are always simultaneously at work. Base assets are more principal-secure but exposed to inflation, while Body and Crest assets should outpace inflation but with higher principal risk or “volatility” – unlike base assets they might fluctuate in value by 10-25%. In the re-emerging high-tech global era both risk factors have become more confusing. What our parents considered secure may now be unreliable, even unsafe – think of the United Airlines pilots’ defined benefit pension plan5, or Enron stock held in the employee’s 401k6, or General Motors corporate bonds where other large national pension funds lost billions when GM failed7. In the past decade even municipal bonds have increased principal risk due to higher debt exposures by states (e.g., Illinois, New York, New Jersey) or cities (Chicago, Detroit, Stockton). A professionally managed muni-bond portfolio can own high-quality, low default-risk bonds and diversify these factors. How to protect your path from risk? Three moves guide your plan. First, matching your budget needs to your income resources - budget “needs” and “wants” are assessed and then the plan builds

or “allocates” the Wave-Base and the Wave-Body assets using investment techniques that may deliver steady income with mitigated or managed risk to principal and which may also offset inflation over time.

Secondly, re-adjusting or “rebalancing” the Base and Body asset mixes periodically and methodically. In periods when higher

risk assets outperform lower risk assets, the plan can be re-balanced by trimming the higher risk investments (“selling high”) and re-positioning to other diversified or lower risk assets (“buying low”). This maintains a steady investment policy.

Third, periodically review and repeat steps one and two. An experienced financial and investment advisor can provide vital resources and ongoing service to you with this complex and often frustrating set of responsibilities: First, by objectively tracking your asset and lifestyle variables into a cohesive next-wave plan; secondly by prudently positioning assets into your wave portfolios based upon the plan requirements; and third by re-adjusting wave-assets and providing you with invaluable feedback as your life or as economic conditions change.

5 In 2005 courts allowed the UAL Employee Pension Plan to default and terminate; its assets and benefits are now trusteed with the Pension Benefit Guarantee Corporation (PBGC). The default also contributed to the serious reduction of PBGC reserves. 6 In 2001 the failure of Enron Corporation devastated the retirement savings of many Enron employees who held the stock in their participant-directed 401k accounts. For this reason many 401k plans prudently avoid investment in company stock into employee retirement savings plans. 7 In 2009 General Motors filed for bankruptcy which triggered the default of GM corporate bonds. Many employee pension plans owned these bonds and suffered losses into the billions of dollars.


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Recall gurus Greenspan and Soros comments about how global and financial markets have been transformed in their lifetimes. Likewise, new financial tools and technologies have emerged that revolutionize a boomer’s next-wave tool-kit. At the same time, many investors are overwhelmed, even paralyzed, with the daunting set of choices available. Let’s break it down to the wave’s base, body and crest and see how different tools and techniques fit specific needs and objectives in a next-wave portfolio.

Base-Wave Tools The stabilizing base holds secure assets, including income assets (pension, Social Security) and investment assets (fixed income bonds, CDs, fixed annuities). Social Security is a key component to base assets. First, you have to decide if you trust it? Most objective studies indicate that current benefits will be sustainable for the 55+ age group while younger participants will probably see changes. Remember that Social Security has been adjusted significantly over the years because fewer workers are now supporting more retirees (the “demographic” wave) and because modern medicine has increased human lifespans (the “tech” wave). These adjustments have included later retirement ages (currently ages 62-70), “means testing” which involves decreasing benefits or increasing taxes on benefits for wealthier retirees and increasing premium costs (currently 7.65% paid by employee and employer, or 15.30% total for Social Security, Social Security Disability, and Medicare for most wage income). It’s unlikely that current baby-boomer benefits will be changed.8 Based on your lifestyle needs and assets, you may have enough savings to exclude Social Security from your planning – but for most boomers SSI retirement benefits will serve as part of their Base income. The current Full Retirement Age (“FRA”) for those born in the 1943-59 wave is around age 66, and age 67 for those born in 1960 or later. A reduced SSI benefit can be triggered as soon as 62, but most next-wavers should think about waiting until their FRA age or even age 70 because the annual benefit increases by 8% per year between early retirement age and age 70. Consider a Social Security participant who averaged $75,000/year income:

Early benefit age 62: @$1400 / month Full Retirement Age (“FRA”): @$2000 / month Age 70 optimal benefit: @$2660 / month

Benefits increase with “cost of living allowances” (“COLA9”) over time, so the larger FRA or age 70 elections not only start higher but also grow more dramatically over the income period. To optimize the COLA advantages, you will need to then live to around age 80-

8 The ratio of premium paying workers per beneficiary will decrease from 2.8 to 2.1 by 2035. Life expectancies have increased from 67-69 when Social Security was created to 75-85+ today. Current SSI retirement assets are sufficient to pay benefits until 2033. Source: Social Security Administration 2014 OASDI Trustee Report. 9An adjustment made to Social Security and Supplemental Security Income to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period. (Source: http://www.investopedia.com/terms/c/cola.asp)

http://www.investopedia.com/terms/s/socialsecurity.asp

http://www.investopedia.com/terms/s/ssi.asp

http://www.investopedia.com/terms/c/cpi-w.asp

http://www.investopedia.com/terms/c/cola.asp


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83.10 The American Society of Actuaries estimates that one spouse in a non-smoking couple has a 50% likelihood of reaching age 9211 so it’s clear there are advantages to waiting at least to the FRA age to start SSI income. There are many other key factors to consider in your Social Security strategy:

Married couples may claim benefits at different times. For example, the lower earning spouse may elect his or her benefit

at FRA age while the higher income earner defers to age 70 – in this case the larger benefit increases at 8%/year, increasing the survivor benefit for the lower earning spouse.

For married couples, Social Security planning turns on your financial situation, age difference, and health and life expectancies.

In the case of divorce, Social Security spousal benefits are provided to more than one ex-spouse of a retired worker as long as the marriage lasted 10 years or more and the claiming ex-spouse is age 62 or older and has not re-married.

Social Security benefits may be subject to income tax. For example, for couples with earned income of @$32-44,000 up to 50% of benefits may be taxable; for couples earning over $44,000 up to 85% of benefits may be taxed.

If you are a public employee (e.g., K-12 teacher, municipal or state worker) your SSI benefit may be reduced. Your advisor can help analyze the variables in your situation and then come up with a plan to optimize SSI income. It’s clear that a well-planned Social Security election can add to your next-wave bottom line. There are a few rules to keep in mind: Pension income may be another “guaranteed” component to your base-wave, also called “defined benefit” (“DB”) income. Here the key is to carefully track both the future benefit and the financial solvency and condition of the plan itself. Get an annual statement which projects your future benefit and gives a basic accounting of the plan’s financial health. Tracking the health and solvency of the plan is more difficult. The DB pension plan’s value to you is future income, say even a modest $500-$1000/month. If you were to “capitalize” this income, that is replace it with assets from savings at say a 5% rate of return, you would need $120-$240,000 to replicate the $500-$1000/month income stream. Your advisor can provide invaluable assistance in tracking your benefit and the plan’s operating solvency and then integrate the future benefit into your post-career income planning. Bond income is another effective but also complex Base income tool. A bond is a debt instrument (usually $1000 per bond) issued by an institution such as a city, a state, or a corporation – the issuer promises to redeem (“pay the principal back to you”) the

10 Source: “Retirement Planner: Delayed Retirement Credits 2015” and “Retirement Planner: Benefits by Year of Birth 2015, www.ssa.gov. Totals do not include Cost of Living Adjustments. 11 Source: American Society of Actuaries, Transamerica Life “Unlocking Social Security,” 2015.

http://www.ssa.gov/


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bond at a future date (the bond’s “maturity”) and pays income (“interest”) to the bondholder during the bond’s life. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Municipal bonds are lower yielding but their interest is usually exempt from federal income tax so they may be more effective for higher income bondholders. Corporate bonds pay higher interest which is usually taxable as ordinary income. Bonds can be owned directly, in mutual funds12, or in exchange traded funds (“ETFs”).13 An increase in interest rates may cause the price of bonds, bond mutual funds and bond ETFs to decline. Investing in bond mutual funds and bond ETFs involves risk, including loss of principal. Bond principal risk has increased dramatically in recent years. The 2008 financial crisis involved the failure of bonds comprised of individual mortgages, a class of securities previously considered safe. Individual and institutional investors such as pension funds have experienced significant losses when municipalities (e.g., Stockton, California, or Detroit, Michigan) and corporations (General Motors) have defaulted on their bonds. An advisor can help build a quality bond portfolio using careful research and ongoing oversight. “Fixed” annuities14 may also fit in this Base set of income assets. Fixed annuities are long-term investment vehicles designed for retirement purposes. They provide a steady income stream over the life of the annuity holder. “Annuitization” involves transferring the annuity principal to the insurance company and in return the annuitant receives income guaranteed by the insurance company over a fixed period, usually a lifetime. Guarantees are based on the claims paying ability of the issuing company. Income may also continue

12 A mutual fund is a now common investment vehicle which allow individual investors a convenient way to own a broad basket or “pool” of securities such as stocks, bonds, money market instruments, and similar assets. Mutuals may be “actively managed” by an asset management professional or team, or they may be a “passively managed” computer-driven model of a particular index such as the Standard & Poor’s 500 U.S. Large Company index. The fund is managed according to an investment objective defined in its prospectus. Mutual funds can only be purchased or sold at the end of a trading day. 13 Exchange-traded funds (“ETF”) are relatively new investment vehicles which allow investors a convenient way to own a broad basket or “pool” of securities such as stocks, bonds, money market instruments, and similar assets. ETFs may be “actively managed” by an asset management professional or team but are more commonly “passively managed” computer-driven models of a particular index such as the Standard & Poor’s 500 U.S. Large Company index, but also may be comprised of an index sector, such as the S & P 500 Transportation sector. Exchange Traded Funds concentrating in specific industries are subject to higher risks and volatility than those that invest more broadly. The fund is managed according to an investment objective defined in its prospectus. Because ETFs trade intra-day like stocks and not merely at the end of a trading day like mutual funds, they provide investors with greater short-term liquidity. An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors. 14 A fixed annuity is a contract issued by a life insurance company where the investor is seeking income either at some point in the future (a “deferred annuity”) or immediately (an “immediate income annuity”). The contract’s income and principal are “guaranteed” by the insurance company’s reserves. Generally, life companies are regulated by state insurance commissions to maintain sufficient reserves to meet future liabilities. Services such as Standard & Poor’s, Fitch, A.M. Best Company, and Moody’s provide regular ratings of a company’s financial health. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax and surrender charges may apply.


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to a spouse under a “joint-survivor” option. Once annuitized the principal generally cannot be accessed, so annuitization requires careful and deliberate planning and implementation.

In recent years conventional fixed annuities have become less popular due to low interest rates. New versions, called “fixed indexed annuities” (“FIAs”) provide a similar principal guarantee but are managed to track a higher risk investment index such as Standard & Poor’s 500 U.S. Large Companies index. The annuity principal is never directly exposed to the higher risk market index but rather the annuity tracks the index using options.15 FIAs generally capture only a portion of the index’s total annual return because the insurance company also guarantees the annuity principal if the index return is negative. In addition, fixed and fixed-indexed annuities may offer income benefit riders which guarantee income streams without annuitization. Income riders provide insurance company guaranteed income over the lifetime of the annuity-holder – rather than annuitization where the annuity-holder relinquishes control of the investment principal, an income rider provides ongoing access to the remaining annuity principal for possible emergencies. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policyholder should review their contract carefully before purchasing. Annuities are complex instruments which may be included in an income plan only after careful consideration and implementation. A financial advisor can provide invaluable assistance by determining whether they make sense in your set of assets.

Body-Wave Tools While base-wave assets work to protect required income, the other risk is inflation, the risk that over time your assets and income will not keep pace with rising prices for goods and services. Principal risk is sudden, shocking, like the 2007-09 “shark attack” financial crisis, where the U.S. stock market fell by as much as 50%. Inflation risk is subtle, more difficult to see and measure, like the ocean’s incessant erosion of the seashore. It’s constant but also variable – the 1970’s saw double-digit inflation rates that cut consumer spending power in half about every 10 years. In recent decades inflation has been closer to its historical average of 2-3% per year. Yet at 3% average inflation, a starting next-wave budget of $100,000 would have to nearly double to $180,000 by age 85. Inflation is also uneven – for example, over the past 20 years healthcare costs have risen far more rapidly than average inflation. Inflation means that your body-wave assets will need to generate more income over time. Here’s the challenge. Let’s say your higher risk investments such as IRA or 401k stock mutual funds have been growing in the 6-8% per year range or about the average growth of large company stocks over time. Included in that 6-8% is a 2-3% inflation rate, so the actual growth net of inflation was closer to 4-5%. Inflation doesn’t go away when next-wave income begins – the longer you live the 15 Options are a financial derivative sold by an option writer to an option buyer. They are typically purchased through brokers. The contract offers the buyer the right, but not the obligation, to buy (call option) or sell (put option) the underlying asset at an agreed-upon price during a certain period of time or on a specific date. The agreed upon price is called the strike price. American options can be exercised any time before the expiration date of the option, while European options can only be exercised on the expiration date (exercise date). Exercising means utilizing the right to buy or the sell the underlying security. Source: https://www.investopedia.com/terms/o/option.asp

https://www.investopedia.com/terms/o/option.asp


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greater its effect. This is a hypothetical example and is not representative of any specific situation. Of course your results will vary and any hypothetical rates of return used here may not reflect fees and charges inherent to investing. This is why a next-wave investment portfolio will continue to employ carefully monitored and controlled investment risk, sometimes referred to as diversified risk. The four major asset categories in a well-diversified body-wave investment portfolio include stocks, bonds, real estate, and cash. A diversified portfolio is managed to try to optimize asset performance in each category. Remember that a diversified portfolio cannot be guaranteed to fully protect against market risk, nor enhance overall returns, nor to outperform a non-diversified portfolio.

Stocks can be concentrated in more stable, income (“dividend”) producing companies – risk is potentially reduced by owning larger company stocks with good balance sheets that are making enough profits to both distribute dividend income to you and to reinvest in the company’s future growth. If the broad stock market “corrects” – the S & P 500 has routinely experienced a 20% or greater drop every 4-5 years – these companies tend to continue to generate steady income even as their stock price fluctuates with the overall market. Of course payment of dividends is not guaranteed and companies may reduce or eliminate the payment of dividends at any given time. A diversified portfolio may also own high-quality mid-size, smaller company, and global or international stocks to increase diversification and opportunity. However, these supplemental stock categories require much greater research and monitoring – they are potentially higher appreciating assets, to help with inflation, but with higher principal risk.

Recent investment technology – fractional share ownership – also facilitates direct stock ownership portfolios – you and your advisor can now control which companies are placed in portfolios as small as $25,000. This facilitates socially responsible impact investing (see further) but also is helpful when an investor needs to exclude an overly concentrated stock already owned in an employee profit sharing or stock ownership plan.

Bonds are usually deployed in body-wave assets just as they serve the lower risk base-wave assets. However, here bonds may generate more robust investment return by moving up the risk ladder to include corporate and international fixed income assets. Again, with more potential return comes greater principal risk, so this category requires more careful ongoing management. Bonds are subject to market and interest rate risk if sold prior to maturity and bond values will decline as interest rates rise. Note also that bonds are subject to availability and change in price.

Real estate investments fit into body-wave assets and are usually held in the form of real estate investment trusts (“REITs”). An “equity” REIT invests in a diversified portfolio of directly owned real estate (usually commercial or multi-family properties) and may be purchased in the REIT’s initial offering or it may also be traded like a stock on the major stock market exchanges. Equity REITs are linked to commercial real estate market properties which can be volatile due to adverse macro-economic changes and their impact on property values, tenant defaults and occupancy rates among other things. A mortgage REIT owns a diversified portfolio of directly held commercial mortgages. Hybrid REITs may own both equity and mortgage assets. REITs often receive special tax benefits and may achieve higher investment returns but with increased risk. REITs benefit investors in several ways: first, because of their lower


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risk correlation to other stock or bond assets they provide portfolio diversification; second, they provide smaller investors with access to larger scale assets such as commercial real estate and higher yielding private mortgage arrangements; third, they provide professional management. Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for investors. There is no assurance that the investment objectives of a REIT or real estate investment program will be attained.

Variable annuities (“VAs”) serve body-wave assets but with more potential investment return than fixed annuities because the underlying investment of assets are to stocks, bonds, real estate, and other diversified “sub-accounts.” Issued by life insurance companies, most contemporary VA policies offer dozens of investment alternatives which allows for advanced and customized asset allocation. Variable annuities are long term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They have fees and charges, including mortality and expense risk charges, administrative fees, and contract fees, and like stocks or risk-oriented investments are sold only when accompanies by prospectus. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax and surrender charges may apply. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value. For higher income investors still in their accumulation phase, a non-qualified (non-IRA) VA can be a viable alternative to taxable mutual funds or bond mutual funds because investment gains are 100% state and federal income tax deferred – taxes are paid on withdrawal when the investor can control tax exposure and may have lower income tax exposure. This is helpful when an investor wants to re-position from one sub-account to another – in a mutual fund environment a move from one mutual fund to another would likely trigger a taxable event, while re-positioning between sub-accounts of a VA triggers no taxable event. However, all future VA income withdrawals are treated as ordinary income rather than capital gains, and this may pose a disadvantage for some taxpayers.

VA investments can be built with income benefit riders which are guaranteed by the life insurance company to provide a secure lifetime income stream even if the account’s actual cash value is depleted. Usually the future benefit grows by the greater of a guaranteed annual increase (e.g., 5% per year) or by the VA’s investment gain year over year. How can this work? The insurance company does what insurance companies do – they manage risk by charging a reserve premium of @ .75-1.5% per year on the benefit amount to create a future reserve in the event the investor’s cash is depleted during the income distribution phase. The benefit rider arrangement is not the same as annuitization because the investor continues to own and have access to the remaining cash value of the contract. Benefit rider reserving allows the company to manage future income risk while giving the investor a potential upside with higher yielding investment sub-accounts. Premium reserves are not a profit center for the company. Rather, just like fire or auto insurance, insurance companies manage income benefit reserves to protect from risk – the income benefit reserve premiums are invested in secure assets and held for future liabilities. Riders are additional guarantee options that are available to the annuity contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the


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policy holder should review their contract carefully before purchasing. Annuity guarantees are based on the claims paying ability of the issuing insurance company.

Crest-Wave Tools Crest-wave, higher risk assets, such as a stock option plan concentrated in a single stock, or a closely business, may fit into the top of the investment pyramid. Often crest-wave assets are also identified for charitable gifting, or legacy planning such as a business succession plan to the next generation of child or grandchild owners of your business. Higher risk assets include unmanaged or large and undiversified stock positions, high-risk limited partnerships, or speculative real estate, or illiquid and high-risk hedge funds. If the success of a next-wave financial plan could withstand the loss of principal, such investments may be considered and can even add to the plan’s overall diversification. In the same light, gifting either to family or charity can be a liberating use of one’s net worth – many turn to socially directed projects in their next-wave lives, devoting not only assets but also their time and experience to worthy causes.

Socially responsive impact investing (“SRI”) can be integrated into your investments – SRI gives you the power to express your ethical, moral, and environmental values in the deployment of your assets. SRI has grown dramatically in recent years – by 2018 SRI investing increased to over $12 trillion, or one in four dollars of assets under professional management in the United States.16 While SRI mutual funds have been available for decades, recent advances in technology have enabled private portfolio managers to offer efficient stock screening even to accounts as small as $25,000. Portfolios can now be managed to limit or exclude conventional SRI objectives (alcohol, tobacco, firearms) as well as more specific goals such as board of director diversity, animal welfare, gambling, human rights, labor relations, nuclear power, stem cell research, predatory lending, and weapons or military. SRI is not a perfect science – information technology, for example, is generally considered socially non-impact yet it finds its way ubiquitously into weapons systems. For this reason, at the investor’s direction, SRI managers may also be able to exclude specific companies. Investment returns will vary and your return on investment is not guaranteed and may be different than your non-SRI investing neighbor. This ability also serves a practical function by allowing an investor to control portfolio allocation. For example, if an investor carries a large stock position in their employer’s stock-option plan that stock can be excluded from a privately managed portfolio.

16 US SIF Foundation, 2018 Report on US Sustainable, Responsible and Impact Investing Trends. https://www.ussif.org/sribasics

https://www.ussif.org/sribasics


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Get your team moving together…

Money management is challenging because, more than any generation in history, next-wave boomers are on their own. Sure, we have the tools and the technologies – in many cases we created them – but doing the job is a different deal than just having the know-how. It’s a full-time job technically and emotionally – you not only have to crunch the numbers and spend hours of screen time each day, but then you have to worry and fret over your decisions and strategies when markets get crazy. You can do it, just keep in mind that to do it right requires much more time, expertise, and energy than simply plugging your life into so-called “robo-adviser” tech tools.17 Recall here the Vanguard research that discovered how effective financial planning and investment advice can potentially increase total portfolio returns on investments by as much as 3%. Professional advice may actually pay for itself by systematically executing the three key responsibilities: (1) asset allocation driven by the financial plan and investment policy; (2) periodic re-balancing to the allocation model; (3) coaching and emotional guidance when capital markets get volatile.

Prudent portfolio management demands an investment policy (“What do you need, what’s the investment objective – income, growth of assets – over what time period? …with what risk?”), investment allocation (“What’s the best mix of assets to achieve the objective?”), then risk and performance monitoring (“How are the assets performing and at what risk compared to the broad

17 Robo-advisor tools provide lower cost, internet accessed and automated portfolio management services without the input of human advisors or planners. Robo-advisors use similar software tools as traditional financial advisors but typically offer only money management tools such as allocation and portfolio re-balancing, and do not include other vital services such as healthcare, estate planning, retirement or tax planning. This is why robo-advising has become popular with younger, lower asset investors seeking only portfolio allocation strategies.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCPru4oDwh8cCFcJ8kgodk4IN7Q&url=http://www.californiagoldenblogs.com/2012/5/27/3046089/cal-womens-crew-ncaa-championship-grand-finals-open-thread&ei=Mbq8VbqSKsL5yQSThbboDg&bvm=bv.99261572,d.aWw&psig=AFQjCNHF9fwBg6qJK8akPCADrNXV5m1a-w&ust=1438518000726620

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCPru4oDwh8cCFcJ8kgodk4IN7Q&url=http://www.californiagoldenblogs.com/2012/5/27/3046089/cal-womens-crew-ncaa-championship-grand-finals-open-thread&ei=Mbq8VbqSKsL5yQSThbboDg&bvm=bv.99261572,d.aWw&psig=AFQjCNHF9fwBg6qJK8akPCADrNXV5m1a-w&ust=1438518000726620�


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market?”), and finally re-balancing (“Re-positioning the risk/return mix back to its original goals when higher-risk/return assets get too large”). Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. But who does all this? Do you really want to get up every morning and review your portfolio assets, one by one, and are you comfortable you are qualified to manage your portfolio? Asset management requires lots of training and experience – it’s a full-time job – but once that’s in place it really boils down to hours and hours of tedious, repetitive work. Some next-wavers might want to take on their money management as a next-wave career, but do you? Do you want to fret over your money? Will your confidence hold up during a market correction or will you panic and sell-off good assets? Recall that in past generations defined benefit pensions took charge of all these jobs – opening the check in the mail was pretty much the retiree’s entire job. With the disappearance of defined benefit plans this is all placed on the next-waver’s shoulders. Today, thanks to the technology wave, customized, high quality management services can be accessed at reasonable fees. An experienced advisor will be able to fit your assets into tools and techniques that make your money-life work. They can connect you to experienced teams with proven track records who can examine, identify, and manage high quality assets, and who go to work every day for you. Finding competent and helpful advisors is a first step. Pick your team and get it working together. Most already have a trusted CPA – if you need to fill in the attorney or financial professional members ask your CPA for referrals. Friends, family members, and work associates may also be very helpful in the referral process.

Other resources that help include: The Society of Financial Service Professionals: http://www.financialpro.org/ The National Association of Estate Planners and Councils: http://www.naepc.org/ The Investments and Wealth Institute (Formerly IMCA): https://investmentsandwealth.org/home American Institute of Certified Public Accountants (AICPA): http://www.aicpa.org/

http://www.financialpro.org/

http://www.naepc.org/

https://investmentsandwealth.org/home

http://www.aicpa.org/


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Summary “You are never too old to set another goal or to dream a new dream.”

C. S. Lewis

“It’s not just whether you win or lose, or even how you play the game… it’s also about staying in the game…play on…!”

Anonymous

Everyone has a dream or a faithful calling, something they want and need to do with their life. Living your dream can bring you to new vistas and promontories, to new or renewing visions of what your life can mean, can do. But to recall JFK, dreams must be made to happen. Your next-wave path will move you through an exciting yet turbulent and unpredictable world. Most likely you cannot make your dream happen alone. Others can help you. They can liberate you from the risky and time-consuming practical jobs so you can pursue your unique talents and abilities. Catch your wave, find your passion…get your plan…then do it, make it happen!

http://www.brainyquote.com/quotes/authors/c/c_s_lewis.html


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Bibliography: Partha Dasgupta, Economics: A Very Short Introduction, Oxford University Press, 2007. Harry Dent, The Demographic Cliff, Portfolio-Penguin Group, New York, 2014 Richard Dobbs, James Manyika, Jonathan Woetzel, No Ordinary Disruption – the Four Global Forces Breaking All the Trends, New York, Public Affairs, 2015. Robert William Fogel, The Fourth Awakening and the Future of Egalitarianism, Chicago: University of Chicago Press, 2000. Milton Friedman, Capitalism and Freedom (Fortieth Anniversary Edition), Chicago, IL, USA: University of Chicago Press, 2009. Thomas Friedman, The Lexus and the Olive Tree, New York: Farrar, Straus, Giroux, 1999; and The World is Flat, Farrar, Straus and Giroux, New York, 2005. Charles Gave, Anatole Kaletsky, & Louis-Vincent Gave, Our Brave New World, Hong Kong: GaveKal Research, 2005. Robert Gilpin, Global Political Economy: Understanding the International Economic Order, Princeton & Oxford: Princeton University Press, 2001. David Graeber, Debt, The First 5,000 Years, Brooklyn: Melville House, 2011. William Greider, One World Ready or Not: The Manic of Global Capitalism, New York: Simon & Schuster, 1997. Don A. Holbrook, The Next America – How to Survive and Thrive in an Unpredictable Economy, Motivational Press, Inc., 2014. Eric Janszen, The PostCatastrophe Economy – Rebuilding America and Avoiding the Next Bubble, New York: The Penguin Group, 2010. Arnold Kling, Nick Schulz, From Poverty to Prosperity, Intangible assets, hidden liabilities, and the lasting triumph over scarcity, New York: Encounter Books, 2009. Benoit Mandelbrot, Richard L. Hudson, The (Mis)Behavior of Markets, New York: Basic Books, 2004. Douglas North, Structure & Change in Economic History, New York: W.W. Norton & Company, 1981. Michael Mandelbaum, The Ideas That Conquered the World, New York: Public Affairs, 2002. David Saylor and Greg Heffington, Get Inspired to Retire, Kaplan Publishing, 2006.


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Schumpeter, Joseph, Can Capitalism Survive – Creative Destruction and the Future of the Global Economy, New York: Harper Perennial Modern Thought, 1976. Soros, George, The Crisis of Global Capitalism, New York, NY: Public Affairs, 1998. Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, New York: Random House, 2007. Alvin Toffler, The Third Wave, New York: William Morrow and Company, Inc., 1980. Peter J. Wallison, Hidden in Plain Sight: What really caused the world’s worst financial crisis and why it could happen again, New York, Encounter Books, 2015. 1 See the landmark 1967 study by Holmes and Rahe in 1967 of 43 stress producing life-events, called the Social Readjustment Rating Scale (SRRS). https://rdc02.uits.iu.edu:8781/pls/apex/f?p=1041:21:6647728373465274::NO::: 2 Wind, Edgar, Pagan Mysteries in the Renaissance, New York: W. W. Norton, 1968, p. 222. 3 Alan Greenspan, quoted by Thomas Friedman, The Lexus and the Olive Tree, New York: Farrar, Straus, Giroux, 1999, p. 368. 4 George Soros, The Crisis of Global Capitalism, New York: Public Affairs, 1998, p. 108. 5 Taleb, Nassim Nicholas, The Black Swan: The Impact of the Highly Improbable, New York: Random House, 2007, p. 176-177; see also Benoit Mandelbrot, The (Mis) Behavior of Markets. 6 Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. (http://www.investopedia.com/terms/g/gdp.asp). 7 Mandelbrot, Benoit, The (Mis)Behavior of Markets, New York: Basic Books, 2004, p. 96-97. 8 Dobbs, Richard; Manyika, James; Woetzel, Jonathan (2015-05-12). No Ordinary Disruption: The Four Global Forces Breaking All the Trends (Kindle Locations 313-317). PublicAffairs. Kindle Edition. 9 Dent, Harry S. Jr., The Roaring 2000s, New York: Simon & Schuster, 1998, p. 43. 10 “The process of sustained economic growth that historians believe began between 1750 and 1830 radically altered the manner and standard of living of Western men and women.

What were the changes…?

https://rdc02.uits.iu.edu:8781/pls/apex/f?p=1041:21:6647728373465274::NO

http://www.investopedia.com/terms/g/gdp.asp


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Population growth…demographers estimate that world population was approximately eight hundred million in 1750. It was in excess of four billion by 1980. (Coale, Ansley J.,

and James T. Trussell (1974). “Model fertility schedules: Variations in the age structure of childbearing in human populations.” Population Index 40: 185–258)… The Western world achieved a standard of living which no counterpart had in the past. …The average length of life almost doubled in some developed countries. …In the Western world agriculture ceased to be the dominant activity; industry and service sectors of the economy replaced it in significance. …In the U.S. the 5 percent of the

population engaged in agriculture could feed the other 95 percent and still have enough left over to make the United States a world leader in the export of agricultural goods. …The Western world became an urban society with all that term implies concerning increasing specialization, division of labor, interdependence, and inevitable externalities. Continuous technological change became the norm. New sources of energy were harnessed to do men’s work, and new materials and substances created to satisfy human wants.” (Douglass C. North, Structure & Change in Economic History, 1981, New York: W.W. Norton & Company, 1981, p. 158-159.) 11 “The internet will change everything. The industrial Revolution brought together people with machines in factories, and the Internet revolution will bring together people with knowledge and information in virtual companies. And it will have every bit as much impact on society as the Industrial Revolution. It will promote globalization at an incredible pace. But instead of happening over a hundred years, like the Industrial Revolution, it will happen over seven years. (John Chambers, President, Cisco Systems, in interview with Thomas Friedman, quoted in Thomas Friedman, The Lexus and the Olive Tree, p. 117).) 12 David Brooks, New York Times, published in the Boulder Daily Camera, May 3rd, 2008, page 15A. 13 U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, Washington D.C.: U.S. Government Printing Office, 1975, 139; U.S. Bureau of the Census, Statistical Abstract of the United States, Washington D.C.: U.S. Government Printing Office, 1998, table 672. 14 Robert William Fogel, The Fourth Awakening and the Future of Egalitarianism, Chicago: University of Chicago Press, 2000, p. 2. 15 Ibid, 8-9. 16 Arnold Kling and Nick Arnold, From Poverty to Prosperity, 4. 17 Greg Easterbrook, Sonic Boom – Globalization at Mach Speed, New York: Random House, 2009, p. 43. 18 David Brooks, New York Times, Boulder Daily Camera, May 3rd, 2008, p. 15A. 19 Robert Gilpin, Global Political Economy: Understanding the International Economic Order, Princeton: Princeton University Press, 2001; Gilpin references the “Solow Residual” which is the statistical factor for technology in the labor-capital-technology equation; Gilpin references “total factor productivity” in Joseph Stiglitz, “Comments: Some Retrospective view on Growth Theory,” in Peter Diamond, Ed., Growth/Productivity/Unemployment: Essays to Celebrate Bob Solow’s Birthday, Cambridge: MIT Press, 1990, 556; Gilpin also references Jeffrey Sachs and Felipe Larrain, Macroeconomics In The Global Economy, Englewood Cliffs, New Jersey: Prentice Hall, 1993, p. 556. 20 Gerald F. Seib, “Now Dawning: The Next Era of Middle East History, Wall Street Journal, 2-1-2011, A8, quoting Mohamed Haykal, a Nasser confidante and renowned chronicler of Egyptian affairs. 21 Joseph Schumpeter, “The Process of Creative Destruction,” in Can Capitalism Survive? – Creative Destruction and the Future of the Global Economy, New York: Harper Perennial Modern Thought, 1976, 41-43. 22 “Creative destruction whips through corporate America,” Innosight Executive Briefing, winter 2012, www.innosight.com/ innovation-resources/ strategy-innovation/ upload/ creative-destruction-whips-through-corporate-america_final2012. pdf. 23 Adam Smith, The Wealth of Nations, ed. Edwin Cannan, New York: Random House, Modern Library, 1937, pp. 3-7, originally published in 1776. 24 Toffler, Alvin, The Third Wave, New York: William Morrow and Company, Inc., 1980, pp. 46-47. 25 Paul Tiffany, Tiffany, Paul, “Why the United States will Continue to Dominate the 21st Century,” General Session #6, Investment Management Consultants Association (IMCA), Fall Professional Development Conference, Denver Colorado, September 26th, 2008. 26 Ibid. 27 Friedman, The Lexus and the Olive Tree, pp. 88-89. 28 “China’s Stock Plunger is Scarier Than Greece,” Ruchir Sharma, July 7, 2015, Wall Street Journal Opinion, http://www.wsj.com/articles/chinas-stock-plunge-is-scarier-than-greecechinas-stock-plunge-is-scarier-than-greece-1436309780)

http://www.wsj.com/articles/chinas-stock-plunge-is-scarier-than-greecechinas-stock-plunge-is-scarier-than-greece-1436309780

http://www.wsj.com/articles/chinas-stock-plunge-is-scarier-than-greecechinas-stock-plunge-is-scarier-than-greece-1436309780


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29 Quoted by Lucian W. Pye in Asian Power and Politics: The Cultural Dimensions of Authority (Cambridge, Mass.: Harvard University Press, 1985), p. 4; in Fukuyama, Francis (2006-03-01). End of History and the Last Man (p. 98). Free Press. Kindle Edition. 30 Robert Capps, “Slumdog Economist,” in Wired Magazine, January 2012, p. 70-75; for an astonishing look at the informal economy go to http://unreasonable.is/video/the-power-of-the-informal-economy/ 31 “By 2025, emerging regions are expected to be home to almost 230 companies in the Fortune Global 500, up from 130 in 2013.” Dobbs, Richard; Manyika, James; Woetzel, Jonathan (2015-05-12). No Ordinary Disruption: The Four Global Forces Breaking All the Trends (Kindle Locations 3050-3051). PublicAffairs. Kindle Edition. 32 “Instead of a series of lines connecting major trading hubs in Europe and North America, the global trading system has expanded into a complex, intricate, sprawling web. Asia is becoming the world’s largest trading region. “South-south” flows between emerging markets have doubled their share of global trade over the past decade. 18 The volume of trade between China and Africa rose from $ 9 billion in 2000 to $ 211 billion in 2012.19 Global capital flows expanded twenty-five times between 1980 and 2007. People crossed borders more than one billion times in 2009, over five times the number in 1980.” Dobbs, Richard; Manyika, James; Woetzel, Jonathan (2015-05-12). No Ordinary Disruption: The Four Global Forces Breaking All the Trends (Kindle Locations 169-174). PublicAffairs. Kindle Edition. 33 Ibid, Kindle Locations 3048-3050. 34 David Brooks, New York Times, Boulder Daily Camera, May 3rd, 2008, page 15A; my emphasis. 35 Gilpin, Global Political Economy, p. 9. 36 Alex Prud’homme, “The Master of the Disaster,” Men’s Journal, February 2013, published by Christopher W. McLoughlin, 72-75, interview with Bob Bea. 37 Employee Benefit Research Institute (EBRI), Source: American College HS355, The American College Press, 2013, p. 14.3.

http://unreasonable.is/video/the-power-of-the-informal-economy/

http://unreasonable.is/video/the-power-of-the-informal-economy/

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